Always make sure that you have enough money to pay your home loan. Most banks insist that you pay your home loan instalments by debit order so you will need to have money in your account. Update your budget to include your home loan and additional expenses such as household and homeowner’s insurance. Check to see if you can pay extra into your home loan, this will save you a lot of money and let you pay off your loan sooner.

Sophie wants to know what documents she will need when she buys a property other than the offer to purchase. Themba tells her that she will need the following:

• The signed offer to purchase
• Three months’ bank statements
• Her Identity Document (ID)
• An application form for her home loan
• Proof of current residence

All of these are needed to get a loan and buy a home.

Sophie is relieved because she thought there would be a lot more documentation to complete. Themba tells her those are just the start.

Once the offer is accepted and the bond is approved, she would need to sign contracts with the transferring attorney and the bond attorney. They will take her through everything she has to sign and explain anything she doesn’t understand.

Themba says that when she is updating her budget to buy a home, she needs to include the following costs:

• Deposit on the house – this is a down payment or partial payment made at the time of purchase. The difference between the purchase price and the deposit is the home loan. The deposit is normally about 10% but it can be more or less.
• Registration costs – these include the attorney’s fees for registering the home loan including correspondence costs, conveyancing fees and VAT. This attorney is the bank’s attorney.
• Transfer fees – this fee is paid to the attorney processing the transfer of the property and is calculated on a scale based on the amount of the home loan. This is the transferring attorney who is chosen by the seller.
• Initiation fee – this is a once-off fee charged by the bank in order to initiate the home loan.
• Service fee – this is a monthly fee charged on home loans for residential property.
• Deeds Office fee – these fees are charged by the Deeds Office for registering the new ownership of the property.
• Property valuation fee – this is charged by the valuator for the assessment of the property.
• Water and electricity – paid to the municipality based on what you use.
• Maintenance of your property – painting, repairing, cleaning. It is important to maintain your property in order for your property to maintain its value.
• Garden services or a gardener if you have a garden that you won’t be able to maintain yourself. • Levies – if you live in a complex/development, you might need to pay levies for the management of the complex/development. The levies will in some cases include your rates and taxes.

Themba asks Sophie if she knows the three types of home loans she can get when she buys a home.

Sophie asks why she will only have levies if she lives in a complex or development. Themba explains that a complex or development is normally a sectional title home which means that, although you own the flat or cluster you do not own the garden and common areas. These need to be maintained by the Body Corporate and they use your levies for maintenance.

If you own a free-standing home, then you own a full title home that means you own the house and the garden areas. You are responsible to maintain the whole property and not just the house.

1. Variable interest home loan
   The variable interest home loan offers a standard variable interest rate that is tailored to your risk profile. There is a minimum amount but no maximum amount for this type of home loan. Your loan will be for a set amount and the interest will be calculated against that amount. The interest will change depending on the interest rate charged by the South African Reserve Bank. The interest rate will change when the interest rate charged by the South African Reserve Bank changes. It has a flexible term of up to 20 or 30 years, giving homeowners the opportunity to settle their debt early or borrow further.
2. Fixed interest home loan

This type of home loan is similar to the variable one except that your interest rate is fixed. This means that you will know exactly what you will pay each month towards your loan. It is normally higher than the variable rate repayment amount. It is normally for a period of twenty years.

3. Annual escalating loan
   This type of loan is for a set amount. It is for a set amount with a maximum value depending on the bank. The repayment is also a fixed amount, your interest is calculated
   beforehand and you know exactly how much you will pay each month.
   The amount you repay increases every year if you get an annual increase. If you don’t get an increase, then the amount you repay will not increase. This loan is not set for a number of years but rather until you have repaid the full amount.